Which is better, a $2000 bond with an APY of 3% and a default rate of 1%, or a $2000 bond with an APY of 5% and a default rate of 2%? (You must set up two probability distributions and find the mean of each).
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Which is better, a $2000 bond with an APY of 3% and a default rate of 1%, or a $2000 bond with an APY of 5% and a default rate of 2%? (You must set up two probability distributions and find the mean of each).
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- can you may this calculations for each of my bonds?. For each of your bonds, calculate expected defavvult percent loss as = default probability* (1 - recovery rate ). You will need to use the default rates and recovery rates that match each bond's rating. 4. Calculate the overall expected loss to your portfolio as the weighted average of the expected default percent lossWhich of the following is correct? O If you pay a price above its face value to buy a bond, your return will be higher than its coupon rate. O When market rate is greater than coupon rate, the bond has a price below its face value. O When determining the value of a bond that payments semi-annual payments, one need to use semi-annual coupon rate to determine the coupon payments and semi-annual market rate as discount rate.Unlike the coupon interest rate, which is fixed, a bond's yield varies from day to day depending on market conditions. To be most useful, it should give us an estimate of the rate of return an investor would earn if that investor purchased the bond today and held it for its remaining life. There are three different yield calculations: Current yield, yield to maturity, and yield to call. A bond's current yield is calculated as the annual interest payment divided by the current price. Unlike the yield to maturity or the yield to call, it does not represent the actual return that investors should expect because it does not account for the capital gain or loss that will be realized if the bond is held until it matures or is called. This yield was popular before calculators and computers came along because it was easy to calculate; however, because it can be misleading, the yield to maturity and yield to call are more relevant. The yield to maturity (YTM) is the rate of return earned on a…
- A bond’s expected return is sometimes estimated by its YTM and sometimes by its YTC. Underwhat conditions would the YTM provide a better estimate, and when would the YTC be better?Calculate YTC using a financial calculator by entering the number of payment periods until call for N, the price of the bond for PV, the interest payments for PMT, and the call price for FV. Then you can solve for 1/YR YTC. Again, remember you need to make the appropriate adjustments for a semiannual bond and realize that the calculated 1/YR is on a periodic basis so you will need to multiply the rate by 2 to obtain the annual rate. In addition, you need to make sure that the signs for PMT and FV are identical and the opposite sign is used for PV; otherwise, your answer will be incorrect. A company is more likely to call its bonds if they are able to replace their current high-coupon debt with less expensive financing. A bond is more likely to be called if its price is above par-because this means that the going market interest rate is less than its coupon rate. Quantitative Problem: Ace Products has a bond issue outstanding with 15 years remaining to maturity, a coupon rate of 8.4%…Consider a portfolio of bonds that have an average default rate of 1%. The correlation between normalized default times for these bonds is 0.14. What is the 99.9% worst-case default rate for this bond portfolio? Note: Your answer must be expressed in percentage terms and accurate to within 0.16.
- Consider a bond with a face value of $1000. An increase and decrease in 1 bp results in the price changing to 995.12707 and 996.09333, respectively. What is its PVBP?The market risk premium is 5.0 percent, and the risk-free rate is 4.0 percent. If the expected return on a bond is 5.5 percent, what is its beta? (Round answer to 2 decimal places, e.g. 15.25.) Beta of the bondAssume that the real risk-free rate is 2% and the average annual expected inflation rate is 4%. The DRP and LP for Bond A are each 2%, and the applicable MRP is 3%. What is Bond A's interest rate?
- What is the stand-alone risk? Use the scenario data to calculate the standard deviation of the bonds return for the next year.Assume that the risk free rate is equal to 0.04. The corporate bond rate for a risky bond is 0.11. Assume a recovery rate of 0.33. All rates in this problem are stated as decimals. Using the precise calculation formula, calculate λ , the probability of default. Round your answer to three decimal places, and state as a decimal. Please answer fast i give you upvote.Assume that the real risk free rate is 3% and the average annual expected inflation rate is 5%. The DRP and LP for Bond A are each 1% and the applicable MRP is 2%. What is bond A’s interest rate?
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